Md Ifetkhar Ahmed, a tomato grower in Godagari, Rajshahi, faces challenges as more than 60% of his tomatoes remain unsold. Initially, Ahmed agreed with PRAN, an agro-processing company, to sell his tomatoes at market rates after the initial harvest. However, PRAN has halted purchases, citing increased production costs due to a VAT hike on tomato-based products.
"The company earlier assured me of buying all tomatoes, but they stopped purchasing since last Tuesday," Ahmed stated. He, along with three partners, invested over $27,500 in tomato cultivation but has only recouped $18,300, leaving a $9,200 deficit.
The VAT increase, implemented by the National Board of Revenue on January 9, raised the rate from 5% to 15% on items such as pickles, biscuits, cakes, chutneys, tomato paste, ketchup, and sauce. This policy change has affected PRAN, a major agro-processor sourcing tomatoes from contract farmers in Rajshahi and other regions.
Kamruzzaman Kamal, marketing director of PRAN-RFL Group, noted, "This year, we signed contracts with farmers to cultivate tomatoes on 2,800 bighas, targeting the collection of 22,000 tonnes." The VAT hike necessitated a revision in production planning. PRAN is a market leader in tomato sauce, holding the largest share of the $55-million domestic market.
AKM Moinul Islam Moin, deputy managing director of PRAN Group, remarked, "The sudden VAT hike has disrupted the entire supply chain and will affect the entire agricultural processing industry." The Godagari plant, capable of producing over 50 tonnes of sauce per day, requires over 400 tonnes of raw tomatoes.
Other agro-processors like Shezan, Kishwan, and Square are also impacted, raising concerns about the sustainability of agricultural processing in Bangladesh. Agro-economists suggest that major agro-processors may import tomato pulp from neighboring countries to maintain affordability amid high inflation.
Jahangir Alam of Bangladesh Agricultural University stated, "There are many new players in the agro-processing industry in recent years, and they should be treated as infant industries." He argued that the tax increase contradicts government policy aimed at mechanizing and commercializing agriculture.
Prof Golam Hafeez Kennedy emphasized the potential impact on food security, suggesting the government withdraw the additional VAT on tomatoes and related agri-items.
Source: The Financial Express